How Telematics May Affect Your Car Insurance

Updated: December 2018

Telematics is a method used to collect information about your driving habits. Insurers may use telematics data to offer personalized driving feedback and safe-driving rewards or discounts on your car insurance policy. Telematics may also come into play if your insurer offers usage-based insurance policies (sometimes called "pay-per-mile insurance").

Telematics data may be captured by a mobile app. In other cases, your insurance company may provide a small telematics device that you can plug into your vehicle's onboard diagnostic port (OBD-II port), which is usually located under your dashboard. Vehicles produced since 1996 typically have this port.

After you've enabled a telematics app or device, it will start recording information about your driving behavior, which it usually sends to your insurance provider over wireless phone networks.

If you're exploring your insurer's telematics program, these are three potential benefits:

Personalized Driving Feedback

Telematics data may provide useful information about your driving habits. For instance, it may record the number of miles you drive, your speed, and how quickly you brake. These systems may also analyze the time of day when you drive. Some insurers' programs allow you to go online or use a safe driving app to track the data your telematics device collects about your driving habits. This data may help you become more aware of your driving habits which can help you learn what you need to do to become a safer driver.

Safe-Driving Rewards

If you enroll in a telematics program with your insurer, then you agree to allow the device or app to send this information to your insurance company. In some cases, if the data shows you practice safe driving, you may become eligible for car insurance discounts or earn rewards for being a safe driver. For instance, drivers may be rewarded for avoiding risks such as hard stops, traveling late at night and driving at high speeds.

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Usage-Based Insurance

Telematics can also provide different options on how you use and pay for your insurance, including programs that allow you to pay per mile. If you opt into this kind of program, your insurer may provide a device that you plug into your car to track the miles you drive. You may be charged a daily rate and a per-mile rate for each mile you drive. Your insurer may allow you to review your trips and daily costs via a mobile app or website.

If you have safe driving habits, a telematics device may be one way to help you earn savings — and become a better driver. Contact a local agent to learn whether your insurer offers a telematics program in your area.